Netflix surprises on subscriber growth: ‘they’ve executed the playbook perfectly’

July 19, 2023 03:06 PM PDT | By Invezz

Netflix surprises on subscriber growth: ‘they’ve executed the playbook perfectly’ — Image source: Invezz

Netflix shares down on revenue outlook

The stock is primarily responding to the revenue guidance that came in shy of Street estimates.

Netflix forecasts $8.52 billion in revenue in its third financial quarter. In comparison, analysts were at $8.66 billion. Still, Alex Kantrowitz of Big Technology said on CNBC’s “Closing Bell”:

Story for Netflix is, it’s making the right moves as a business to exist and thrive in this economy. Had four of their highest single day sign-ups after [password sharing]. That’s been huge for them.

On the earnings front, the streaming giant sees $3.52 a share in Q3 – better than $3.23 per share expected.

Netflix beats the Street in subscriber growth

Netflix added a whopping 5.9 million subscribers in its recently concluded quarter. Experts had forecast 1.82 million additions only. According to Kantrowitz:

20% of new sign-ups are coming via ad-tier. They’re getting some growth from it, we’ll see them monetise that. It’s another incremental revenue source for Netflix.

The mass media behemoth said its ad-supported tier has accumulated over 5.0 million subscribers so far. It also confirmed plans of extending paid sharing to the remaining countries following its success in more than 100 countries already.

More importantly, the California-based company said it will add a similar number of paid net subscribers in its current quarter as it did in Q2. Year-to-date, Netflix shares are up over 50% at writing.

Notable figures in Netflix Q2 earnings report

Earned $1.49 billion versus the year-ago $1.44 billion
Per-share earnings also climbed from $3.20 to $3.29
Revenue increased 2.7% year-on-year to $8.19 billion
Consensus was $2.85 a share on $8.29 billion revenue
Free cash flow jumped to a jaw dropping $1.3 billion

In a letter to shareholders today, Netflix attributed the second-quarter strength to its ad-tier and password sharing. Kantrowitz added:

I give Netflix management a lot of credit. As a business, they’ve executed the playbook perfectly in terms of what they needed to do, where they were, and where they needed to get to.

Netflix lifts its guidance for free cash flow

The Nasdaq-listed firm also raised its outlook for full-year free cash flow to $5.0 billion as it expects to spend less on content in 2023 – partly because the Hollywood is currently on strike.

They’re much better positioned as they have a nice stock of foreign shows and movies. There’s a lot of reality television. They can thrive on those while the rest of competitors figure out what to put on their sites.

On Wednesday, Netflix scrapped its basic streaming plan in the United States as well as the United Kingdom to drive more users to the ad-tier.

Wall Street currently has a consensus “overweight” rating on Netflix shares.

The post Netflix surprises on subscriber growth: ‘they’ve executed the playbook perfectly’ appeared first on Invezz.

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